The future of the Bar – Condensed through the eyes of a Dere Street Barrister

Tag Archives: financial remedy proceedings

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Over the final half of my 37 years as a barrister in private practice, I have been arguing over money.

Not mine, I hasten to add, but other people’s. In particular, divorcing spouses or cohabitees. There comes a time after almost every separation when two people who have lived together and loved, start to argue about the spoils. Those that can afford it rush to a solicitor or direct access barrister and commence battle. Those that cannot pay may chose to go it alone.

Either way, they have embarked on a battle from which there is little respite – until they run out of money, of energy, or are crushed at court in a final hearing.

But the purpose of this blog is not to bemoan honest,hard-working people spending inordinate amounts of their money on lawyers and in courts. It is to examine the fundamental flaws of financial remedy proceedings (as the financial arrangements are called in court).

My first observation is prosaically procedural. How is it that going to court to argue financial splitting of assets can remotely be justified? The cost of this process starts at £12,000 for the couple, and soars to a dizzy £100-120,000 in more complex cases. In J v J the parties managed to rack up £920,000 in costs between them, much to the judicial amazement and displeasure of Mr Justice Mostyn. Do they get a return on their investment? J v J didn’t; and generally, the chances are – not.

Readers of my earlier blogs will recall my commentary on the alternatives of mediation and arbitration, which I will not repeat here. Guidance by a single expert makes sense, assuming the expert knows what a judge would do, and that both parties agree to be bound by the outcome. There is, of course, the other ‘questionable’ alternative of splitting at the outset by way of pre or post-nuptual agreement.

My main concern here is to do with the philosophy of division where children are involved. In fact, my problem goes further – to question of ‘ownership’ and ‘responsibility’.

The financial wars that I have witnessed rarely focus on the children. Yes, this may be the court’s first consideration when it comes to making an order, but the children seem to remain ‘bit players’ in the battles, unless they are to be used as weapons to secure a greater share of the booty for one of the parents.

So, what would happen if we changed the rules?

Imagine this. When two people decide that they are to have children, they would do so in the knowledge that they forfeit ownership of property to them? How would that be?

Simple. The law would deem that all matrimonial property vested immediately in trust for the children, and that each parent became a trustee for the child. Rather than children being ‘the first consideration’ for a court, a child or children would be deemed to be the beneficial owners of all of the property. There would no longer be the ‘divvy up’ entitlement of assets to to each parent; there would be an appropriate of provision for the parents’ immediate needs and no more. The rest would be managed exclusively to provide everything that their child would need through to the age of 21.

What a glorious world that would be – children placed, where they deserve and need to be – at the centre of decision making as the beneficiary and responsibility of their parents’ endeavours.

But will such ever come to pass? Of course not. We have neither the imagination to prioritise children over parental greed, nor the legal system to oversee it.

Instead, we will continue to subsidise the lifestyle of lawyers (of which I am one). But, long may it continue – for after all, what value the future of our children?

You don’t need to be clairvoyant to detect the future for financial remedy cases. With unacceptably escalating costs in adversarial court processes, coupled with the possibility of open justice through public courts, we are unlikely to continue to litigate many financial cases as we have done in the past. The alternatives may not be as I described in Solving Disputes, but there is a lot to commend the concept of private resolution.

So, how well placed are our northern regional centres – such as Manchester, Sheffield Leeds and Newcastle – to meet future demand for private arbitrations of disputes about family finances?

A handful of individual of regional practitioners have taken the plunge to qualify as financial remedy arbitrators, yet there has been no consistent policy to produce pairings, let alone teams within barrister’s chambers or solicitors’ practices. Further, we have developed no marketing arm to promote arbitration, or practice policy to bring arbitrators together.

The Chartered Institute of Arbitrators, as a regulatory body, can do so much – perhaps mainly for London based practitioners – but it hasn’t the reach to make a difference in the provinces, and market weight will not remedy this deficiency for some time to come.

This market sector is highly specialised, so it is unlikely to attract corporate players outside the current legal community of financial remedy practitioners. But that is not to say that the regional market cannot be absorbed by London collectives.

Now may be the time for northern financial remedy arbitrators to make changes – to be less reliant on the old systems of referral – and much more focused on direct marketing with a single regional dispute resolution centre. Lord Justice Munby is paving a way that we in the north would be remiss not to follow.

Between 29 October and 5 November 2014, Mr Justice Mostyn heard a financial remedy dispute between two embattled divorcing parents.

Their home was worth £291k, a property portfolio worth £317k, pensions of £115k and two businesses valued at £2080k.

By the Financial Dispute Resolution appointment on 12 March 2014, they had spent £226k in costs. However, eight months later on 6 November, their legal costs rose to a staggering £920k – nearly one third of their assets.

To avoid “the grotesque leaching of costs”, like Lord Neuberger before him, Mostyn J proposes fixed costs legal services to replace hourly billing, together with costs caps – and is to send the issue back to the President of the Family Courts for action.

This blogger has always been ambivalent towards hourly rate billing, believing that ‘time spent’ varies according to expertise. The lazy or inept lawyer can spend considerable time doing what the expert will do in an instant. With hourly billing, one is overpaid, whilst the other is inadequately rewarded.

But has the judiciary really grasped the nettle of costs?

The simple flaw lies deeper, in the fact that two firms of litigators, whose interests are served by protracting conflict, are permitted to take their clients into headlong battle, for which both the public and their clients pay at an hourly rate.

What do they pay for? Frequently, the ‘what is there?’ – the identity and value or the assets – is not the problem. Where divorcing couples can’t agree, they get an independent valuation. The real issue is to determine ‘what to do’ with what is there; and that is the job for their barrister.

The impenetrable form E – the court designed document intended to set out a financial picture probably fails in every regard, other than to raise rancour. What is needed is a simple schedule of assets, liabilites and income. After all, the court will attend to these (as did Mostyn J) – not the aspirations and wishes of the parties, nor tactical positions crafted by their solicitors. Why, then, should the preparation (and possible agreement) of such a schedule not be made a pre-requisite of a financial remedy claim?

What to do with the assets is frequently fairly obvious. Up and down the country District Judges hear contested cases in a matter of hours and give extempore judgments immediately following the evidence. More frequently, matters resolve at the financial dispute resolution stage when a judge (without hearing evidence) makes sage suggestions.

Why the battle lines? Why two lawyers and an adversarial process? What is wrong with simple experienced and impartial analysis to help resolve these issues? That the parties won’t agree is simply an excuse by an over-priced, unwieldy adversarial system – made possible and perpetuated by the court process.

Regrettably, what Mr Justice Mostyn did not evaluate was the significant cost to the public of hearing the case – numerous appearances before the lower court, a Deputy District Judge, Judge Bancroft’s salary, Mostyn J’s own salary over seven days, the Family Court and High Court buildings, court staff, heating and lighting – to deal with a ‘delinquent’ couple who had spent £920,000 with their lawyers.

How bizarre is it having public courts dedicated to this massively costly process, paid for at huge cost to taxpayers?

In a previous posting Family Proceedings on the Move we caught sight of Judge Stephen Alderson’s pincer move concerning the drafting of court orders by advocates.

With the imminence of the Single Family Court, and the critical time limits by which it will be judged, a further new direction has been given concerning the filing of orders. I have set it out in full below, with some highlighting.

When many years ago, this blogger came to practice at the Bar, the judges drew their own orders – for that was a part of their job – for which they were paid.

Now, it seems, it is a task for the advocates – for which in publicly funded cases, they are not paid. No doubt the President would deem it to be part of the not-inconsiderable ‘pro bono’ work of the 21st Century Bar.

What is even more questionable is the way in which the burden shifts deftly from the Applicant ‘litigant in person’ – to the privately paying Respondent.

So, not only does a represented party bear a responsibility to prepare the case summary, court documentation and bundles, but now to spend further time after the case has been completed in drafting the orders. Those who responsibly seek representation, end up paying the whole cost of case management.

Of course, counsel and solicitors can and do prepare perfectly agreeable orders when needed, but there are cases where a draft order limps back and forth before a reluctant agreement is reached. That is because the advocates have to unravel from the judgment what the judge really intended – and sometimes this can be a mind-boggling affair.

When we listen to a judgment, we take from it a differing emphasis or ‘spin’ , and this may find its way into the order that we draft. Other times, the judge may fail to cover a point that could have been picked up by the judge had she or he drawn up the order. In such cases it is left to the battle lines of counsel and solicitors who may have very different views from the judge.

But for now, it is to be our job. Do it to pleasure the judges. Fail – and it appears that you will be punished on costs. And you don’t want that!

Submission of draft orders for approval in the Single Family Court

This direction applies to the High Court and all of the County Courts sitting in the area of the jurisdiction of the Northumbria Cluster and North Durham Courts.

It has become apparent that on a number of occasions Counsel, advocate Solicitors and/or instructing Solicitors have been responsible for delay in submitting draft orders for approval by the Judge when required to do so and this has caused disruption to the management of cases in a proper time frame. A considerable amount of Court time is being spent pursuing Orders causing delay in producing sealed Orders for the parties.

While it is accepted that in a few individual cases that the Judge and the Advocates may make separate arrangements, at the Advocates request, this direction sets out the expectations of the Judges to apply automatically in all Family cases.

In all cases the responsibility to draft orders and submit them to the Court lies initially with the Advocate/instructing Solicitor for the Applicant however if the Applicant is not represented, then the responsibility falls to the Advocate/instructing Solicitor for the First and then the subsequent Respondents in order unless all of the parties are unrepresented.

In all hearings before a High Court Judge, a Circuit Judge, Recorder or District Judge the Advocate/instructing Solicitor shall submit a draft order for approval within 48 hours.

In the case of final hearings of applications for a Financial Remedy under Part 9 of the FPR 2010 the Advocate/instructing Solicitor shall draft and submit the Order for approval by 4:00 pm on the seventh working day after the close of the hearing.

All draft orders following a hearing shall be submitted by e-mail in Word format (not PDF) to the relevant Court as listed below or by agreement to the individual Judge directly.

If an Advocate/instructing Solicitor has not submitted a draft order as above or as individually agreed then the matter will be referred to the Judge and if necessary listed for a mention before the Judge for an explanation of the delay and the costs of that hearing will be at large.

The Times, May 28 scooped the story. If not subscribed to The Times Online, the reader should turn to Ben Bryant of the Telegraph to pick up the storyline, and Owen Bowcott of the Guardian who digs deeper into the Ministry of Justice denials.

The story turns on possible saving to the Ministry of Justice of £1 billion per year from the ‘wholesale privatisation’ of the courts, freeing them from Treasury control. Private investment and means-tested payments would relieve the taxpayer of a long standing burden.

Sarah Vine of the Guardian also enters the fray, fingering the velum of the fourteenth century Magna Carta, and concluding, “If Grayling has his way, the only heads left above the corporate water will be the judges”.

Whilst the media focus is understandably on the prospect of corporation such as G4S running the court service – and in time perhaps even employing the judges – this blogger is more interested in the imminence of something more subtle.

The state has never run a monopoly on the provision of justice, only – until fairly recently – on the appointment of judges. Their offices would historically follow revenue, and would be granted to those who supported the monarch. Sixteenth century barrister Matthew Shardlake, in CJ Sansom’s ‘Heartstone‘, gives a graphic description of the judges of the ‘Court of Wards and Augmentations’. These were the courts that dealt with wardship (our modern day Family Courts). After the Dissolution of the Monasteries and the seizure and selling of monastic lands, the old ‘Office of Wards’ was abolished and replaced by the Wardship court. These checked the value of lands subject to wardship, and the feodaries negotiated with applicants for the wardship, and land, of minor heirs. Some were granted to the children’s families, but where substantial money was involved, others would be awarded to the highest bidders. “Wards and Augmentations are still sitting”…the courts that brought revenue to the King… would sit all summer”, observed Shardlake.

Justice has always been the younger brother of money, whether in the hands of the client, the lawyer or the state.

The blogger senses that the issue that most concerns government is not the running of courts, but the sheer scale and cost of public justice.

Hiving off the court buildings and administration to the private sector could undoubtedly result in savings – you only have to look at prisons to see this. It could also result in a better service deal for court users. How often as clients or advocates have we wasted hours, or even days, in waiting ‘our turn’ in the overstretched court list before a judge who is expected to react to information given to him or her on the morning of trial? The private sector could not get it more wrong.

The real point of reform is that the public in fact ends up underwriting the cost of everyone’s disputes, no matter how unreasonable. The court ‘issue fee’ no way reflects the cost of running the court and paying for the judges. For genuine civic disputes, this is a bearable social cost. But for private disputes, arguments concerning spousal assets, and company and commercial disputes, the subsidy by the public is unacceptable.

Recently retired Lord Justice Sir Alan Ward summed the problem up perfectly in a noisy floor dispute, “Not all neighbours are from hell. They may simply occupy the land of bigotry. There may be no escape from hell but the boundaries of bigotry can with tact be changed by the cutting edge of reasonableness skilfully applied by a trained mediator. Give and take is often better than all or nothing”.

As other systems are available, why should the taxpayer fund the big-money divorce, the bankers’ dispute or the noisy floor? Yes, the litigation costs of these cases are enormous, but solely to pay the lawyers bills rather than the judges’ salaries and the public cost of running a court.

The government’s agenda is to shed as much work from the state court system as possible. These days, courts clearly do not pay.

There is, of course, the minor problem of Article 6 European Convention of Human Rights, providing “in the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. Perhaps this too is an underlying reason why some politicians are keen for repeal.

So, the blogger will forecast the next steps.

Commercial, company and most civil disputes will be directed towards arbitration, mediation and expert determination at first instance. These processes will be the ‘gate keepers’ for entry to the courts. The ‘reasonable time’ for determination of a dispute will run from the point where the alternative resolution mechanisms have been exhausted.

Likewise, family disputes involving children and money will be referred to alternative dispute resolution – where most will be expected to be solved. Only then, and on sanction of costs, will the courts intervene. The Family Court experiment with public law cases will flounder in delays exceeding 26 weeks and be replaced by tribunals.

Criminal cases will be handled by increasing use of community resolution processes, such as self-referral, the acceptance of voluntary penalties and restorative justice, offenders knowing that these will deliver the best deals. Only the hardened criminal for whom prison is inevitable will the door to the dock opened.

Of course we will still pay for the judges, but a slimmed down bench, with reduced pensions, and the small accompanying coterie of cut price lawyers will be cheap in comparison.

Has the number of private law children or financial remedy court cases dropped over the last year?

On 6 April 2011 rules came into force requiring divorcing couples to attend an information meeting about mediation and other alternatives to court action -before issuing financial remedy or private law children proceedings.

To what extent have they been successful in diverting family cases away from the courts? Well, the picture emerging appears unclear.

Court staff have not regarded it as mandatory that a party issuing an application should show evidence of having attended a MIAM. Only 56% of respondents to the survey said that courts asked about this when they applied to issue. One snapshot showed that in the Principal Registry in London, only 20% of applications were accompanied by evidence of attendance at a MIAM.

Rule 3.2 states that judges “must consider, at every stage in proceedings, whether alternative dispute resolution is appropriate”. Yet 78% of respondents said that their local courts hadn’t asked about this.

20% of solicitors who responded had only referred 0-10 % of their clients to a MIAM, whilst 30% said they had referred the majority of their clients (91-100%) to a MIAM.

89% of respondents reported that 0- 10% of their clients had self-referred to a MIAM.

It appears that courts in different regions are interpreting the rules in different ways.

Respondents’ feelings about MIAMs were clearly mixed. Some reported a higher level of mediation as a result of increased awareness. Many made the point that mediator or collaborative lawyers spot the cases needing a judge and consider a MIAM to be a fruitless additional hurdle. Others spoke of concerns about the cost of a MIAM.

The Ministry of Justice has seen an increase in MIAMs compared with assessment meetings. Judge’s statistics are being checked to see if there is a decrease in applications coming before courts, and at what stage they are being compromised. In the Principal Registry, a 6 per cent drop in private law cases has been reported since April 2011.

The blogger has found MIAMs to be really useful on two levels. In some cases they have resolved all or some of the issues without the need for a court decision. In others they have helped to ease the adversarial nature of subsequent proceedings (especially in children cases), and softened the parties’ expectations of the court process.

Within a decade, the culture of family litigation is likely to change. MIAMs are starting to play a part in this. In almost every case there is something that can be agreed, and reaching some consensus oils the wheels for more collaboration between warring parties.

Financial remedy mediators have been concerned that there would be some cases for which complete agreement might prove elusive – whether a small sticking-point, or a fundamental difference on a particular point.

It’s right to say that facilitation (or mediation) has a very high success rate. But those who are experienced in this field felt that getting parties close to agreement, or even at the point where agreement was never going to happen, and then returning clients to the court process, was not a good idea.

This is where divorce arbitration comes in.

It was originally conceived as a ‘back-stop’ – to be suggested should facilitation not have succeeded in providing a full settlement. The offer of a private arbitration would create the opportunity for the parties to seek a binding outcome, enforced by the courts on the basis that both parties had agreed to it; and the resulting award would be sealed by a court unless there was a good reason not to do so.

This month sees the first forty family arbitrators, trained by the brand new Institute of Family Arbitrators, a group formed to deal with financial arrangements following separation. One of the forty, Marilyn Stowe, senior partner at Stowe Family Law, suggests that the arbitration process will be attractive to two groups of people – those involved in big-money cases, clients who don’t want to wait for the court process; and those who want a specific arbitrator to decide the case or a specific point.

The blogger senses that family dispute arbitration will be taken up by a wider client base. It is an attractive option, not just those with considerable wealth or specific needs – but the ordinary couple who have tried for a mediated settlement and would welcome a final solution should they not agree.

Perhaps Jane Croft’s article yesterday in the Financial Times misses an important point. Arbitration is not simply for the super-rich. After all, they can afford to fight their cases out behind closed doors, before a High Court Judge, with Queen’s Counsel representing them. No, the arrival of private arbitration in the field of financial remedy proceedings is for all – a simple, low-stress, economic alternative to the court battle.

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